The digital revolution has changed the game in mortgage lending over the last few decades, resulting in a rise in digital operations such as online applications and eClosings. While digital strategies have focused primarily on origination, mortgage servicing can take a page or two from origination’s playbook to get off the sidelines and into the digital mortgage game.
Servicers have the longest-lasting relationships with borrowers. Therefore, they have the most opportunities to make an impact on the borrower’s experience over the life of the loan. Yet, the digital origination experience today’s borrowers receive bears little resemblance to the manual, paper-driven processes employed by servicers today.
Though the industry views origination and servicing as separate units, borrowers do not make this same distinction and expect a consistent experience across both. While borrowers cannot change their mortgage servicer due to a poor experience, they can choose another lender if and when they decide to move or refinance, and they can undoubtedly discourage others from using their current lender.
Thus, servicers must consider how they can extend the borrower’s digital experience in origination throughout the life of the loan. While some digital mortgage technologies and processes are origination-specific (e.g., point-of-sale platforms), that is not the case across the board, as eSign, eDelivery and remote online notarization (RON) are equally as applicable in servicing as they are in origination.
Take loss mitigation, for example.
In Q4 2021, the value of mortgage debt outstanding in the U.S. reached $12.5 trillion and in April 2022, the national delinquency rate was 2.8%. The intersection of these two figures represents a massive opportunity in loss mitigation.
Currently, servicers must print the entire loss mitigation package, add tabs at all necessary signature and initial locations and ship the package overnight. Including essential considerations such as regulatory compliance, the average turnaround time for an error-free loss mitigation transaction is 21 days. Transactions affected by errors can take much longer and incur additional costs.
Thanks to eSign and RON technology, servicers can now deliver a user-friendly digital package ready to be eSigned. With a digital package, servicers can reduce the average turnaround time to seven days and address errors quickly and efficiently without extending the process.
The opportunity to go digital
Servicers aren’t the only ones who have noticed an opportunity to go digital. Fannie Mae, Freddie Mac and Ginnie Mae allow servicers to leverage eSign technology for loss mitigation transactions. By enabling mortgage servicers to leverage technology to support at-risk homeowners, the GSEs have made it easier for borrowers to quickly and conveniently access loss mitigation solutions.
Better compliance by embracing technology
By embracing this technology, servicers are meeting both the letter and spirit of the 2013 Mortgage Servicing Rule, the goal of which is “to better inform consumers of, and assist consumers with, options that may be available for consumers having difficulty with their mortgage loan obligations.”
These digital considerations also help servicers to fulfill the CFPB’s recent mandate for “servicers to dedicate sufficient resources and staff to ensure they can communicate clearly with borrowers, effectively manage borrower requests for assistance, promote loss mitigation, and ultimately reduce avoidable foreclosures and foreclosure-related costs” as borrowers exit COVID-19 forbearance.
Using eSign and RON technologies also allows servicers to decrease average turn times by 60% or more, leading to significant monthly savings. For a servicer with a 2,000 monthly document volume, $18,000 in payment advances and a 2% borrowing cost, a conservative savings estimate for would be more than $40,000 in that same time frame
For mortgage servicers looking to expand and enhance their digital capabilities, it’s time to get off the bench and get in the game. By adopting the tried-and-tested digital mortgage strategies employed on the origination team, mortgage servicers can do so with a ready-made, game-winning strategy.
Rick Triola is Division President of NotaryCam, a Stewart company.